本田技研 (HMC) 2019 Q2 法說會逐字稿

We would like to begin our fiscal year 2019 second quarter results presentation.

We would like to first review the financial summary for the first half of fiscal year 2019.

Operating profit was JPY 513.8 billion, achieving an increase by 21.7% compared to the same period last year.

Despite the negative impact of ForEx effects, the increases in motorcycle sales in Asia, the effects of the cost reduction efforts and the reverse effect from the loss related to the litigation settlement in previous fiscal year have contributed to the rise in the operating profit.

Profit for the period attributable to owners of the parent was JPY 455.1 billion, an increase of 19.3% compared to the same period last year.

I would now like to review Honda's business results for 6 months in some major markets around the world.

In Japan, automobile sales totaled 346,000 units, a 4% increase compared to the same period last year.

Cumulative sales of the N-BOX series model for the 6-month period reached the 117,000 units, with the N-BOX successfully becoming the best-selling model in Japan for the first half of fiscal year 2019.

In August, the new CRV was launched, and the total initial number of orders received in 1 month after the launch surpassed 5,000 units.

In the U.S., light truck sales came to 459,000 units, an increase by 7.6% compared to the same period last year, thanks to the rise in sales of the Pilot and other models.

The Civic has been the top-selling model in its segment for 22 months in a row as of September 2018.

With the restoration from the flooding damage under way, the Celaya plant in Mexico has already restarted production, and full production is planned to begin in mid-November 2018.

In China, the Civic has rewritten monthly unit sales records for 3 months in a row from July 2018, and its cumulative sales for the 6-month period came to 111,000 units, an increase by 25.1% compared to the same period a year ago.

In September 2018, the new Crider was launched.

In October 2018, introduction of the new Inspire was announced.

We will now take a look at Asian countries that are the main markets for motorcycles.

In India, motorcycle sales totaled 3,296,000 units, marking an increase by 4.8% compared to the same period last year.

In October 2018, Honda in India announced a plan to increase motorcycle production capacity.

With the construction of a new production line, annual production capacity will increase by 600,000 units, reaching a cumulative annual total of 7 million units by 2020.

In Vietnam, Thailand and Indonesia, the new PCX Hybrid model was launched.

This is the world's first mass production motorcycle model equipped with a hybrid system.

I would now like to touch on some of our most recent news topics.

In October 2018, Honda reached an agreement with Cruise and General Motors to work on jointly developing shared autonomous vehicles.

Creating consistently customer-oriented designs and product packages and fully utilizing advanced interior and exterior design technologies are some of Honda's strengths, and we aim to draw on them to develop attractive, purpose-built autonomous vehicles for ride sharing services.

In the first half of 2018, the HondaJet was the most delivered aircraft in its class.

In August 2018, the deliveries of the HondaJet Elite started.

And in September 2018, the HondaJet and the HondaJet Elite received type certification in India, first type certification received in Asian countries.

In September 2018, Honda was selected for the second consecutive year as a component of a Dow Jones Sustainability World Index, which serves as one of the key benchmarks for socially responsible investing.

Regarding the profit and loss situation on a cumulative basis for the 6-month period, the company achieved the following results: sales revenue totaled JPY 7,865.8 billion, operating profit amounted to JPY 513.8 billion.

The share of profit of investments accounted for using the equity method was JPY 118.2 billion.

Profit for the period attributable to owners of the parent totaled JPY 455.1 billion.

We will now take a look at our financial forecasts for fiscal year 2019 on a consolidated basis.

By incorporating the increasing revenue associated with volume and model mix and the effects of ForEx fluctuations, we have revised our consolidated results forecasts from our previous announcement as follows.

We now expect sales revenue of JPY 15,800,000,000.

We plan on an operating profit of JPY 790 billion, an increase by JPY 80 billion compared to the previous forecast by incorporating the increase in unit sales for motorcycle operations; a rise in profit, thanks to progress in the initiatives for improving business characteristics in each business operation; and the effects of ForEx fluctuations.

We expect the share of profit of investments accounted for using the equity method to be JPY 215 billion.

Regarding profit for the year attributable to owners of the parent, we are aiming for JPY 675 billion.

The exchange rate set for calculating these projections was JPY 110 to USD 1 for the second half of the year.

The average full year exchange rate was also set at JPY 110 to USD 1.

For dividends, as a result of an increase in the operating profit and other factors, the annual dividend for fiscal year 2019 is expected to increase from our previously announced expectation by JPY 3 per share of common stock to JPY 111 per share.

The dividend for the second quarter is JPY 28 per share of common stock.

We will now provide detailed explanations on the financial results and outlook.

I will first review the Honda group's unit sales for the second quarter.

In Motorcycle business operations, group unit sales totaled 5,315,000 units.

In Automobile business operations, group unit sales totaled 1,246,000 units.

In Power Product business operations, group unit sales totaled 1,262,000 units.

Regarding the profit and loss situation, thanks to increases in the revenue in Financial services and Motorcycle business operations, sales revenue rose to a total of JPY 3,841.7 billion, an increase by 1.7% compared to the same period a year ago.

Operating profit amounted to JPY 214.4 billion, an increase of 40.2% compared to the same period last year primarily due to an increase in revenue associated with volume and model mix and the reverse effect from the loss related to the litigation settlement in the previous fiscal year, among other factors.

The operating margin was 5.6%.

The share of profit of investments accounted for using the equity method was JPY 63.9 billion.

Profit before income taxes totaled JPY 283 billion.

Profit for the period attributable to owners of the parent totaled JPY 210.7 billion, an increase by 21.1% compared to the same period a year earlier.

Regarding Honda Group unit sales for each segment, Motorcycle sales totaled 5,315,000 units, a 1.5% increase compared to the same period last year, thanks mainly to a rise in sales in Indonesia and Vietnam, among other countries.

Regarding Automobile business operations, despite the positive effects of launching the N-VAN and an increase in sales of the N-BOX in Japan, a drop in sales in North America due to effects of the flooding in Mexico and a decline in sales of the CRV in China resulted in a total of 1,246,000 units, a 3.6% decrease compared to the same period last year.

In Power Product business operations, an increase in the sales of engines installed on construction equipment in Japan and Europe and other factors led to a total of 1,262,000 units, an increase by 0.3% compared to the same period a year earlier.

Cumulative Honda Group unit sales for the 6-month period is as shown.

Regarding sales revenue for the fiscal second quarter, increases in the Financial services and Motorcycle business operations contributed to a total sales revenue of JPY 3,841.7 billion.

Cumulative sales revenue for the first fiscal 6 months is as shown.

I would now like to provide explanations on the increase and decrease factors that impacted profit before income taxes for the quarter.

Profit before income taxes totaled JPY 283 billion, an increase by JPY 40.4 billion compared to the same period a year earlier.

Operating profit totaled JPY 214.4 billion.

When excluding ForEx effects and the reverse effect from the loss related to the litigation settlement in the previous fiscal year, the operating profit rose by JPY 44.4 billion compared to the same period a year earlier.

Despite negative effects from the flooding in Mexico and the rise in raw material prices, this result was primarily due to an increase in unit sales in Motorcycle business operations and steady growth in Financial services business operations.

A decrease in the share of profit of investments accounted for using the equity method led to a negative impact of JPY 18.3 billion.

Finance income and finance costs resulted in a negative impact of JPY 2.7 billion.

Regarding the profit before income taxes, on a cumulative basis for the 6-month period, an increase in revenue associated with volume and model mix and other factors led to a total profit before income taxes of JPY 641.3 billion, an increase by JPY 63.6 billion compared to the same period last year.

I would now like to discuss results for each business area.

In Motorcycle business operations, an increase in volume and the model mix as well as other factors led to an operating profit of JPY 85 billion, a 24.1% increase compared to the same period a year earlier.

In Automobile business operations, the impact of the reverse effect from the loss related to the litigation settlement in previous fiscal year and other factors contributed to an operating profit of JPY 69.8 billion, an increase by 78% compared to the same period last year.

As for the operating profit for Power Product and other business operations, a decrease in expenses involving the other businesses and other factors led to a total profit of JPY 400 million, an increase by JPY 2.4 billion compared to the same period a year ago.

The operating loss for aircraft and aircraft engine business operations, which are included in the Power Product and other businesses segment, came to JPY 9.3 billion, an improvement of JPY 4.3 billion compared to the same period last year.

In Financial services business operations, the operating profit totaled JPY 59.1 billion, an increase by 25.3% compared to the same period a year ago due mainly to an increase in profits associated with higher operating lease revenues.

Shown here are the cumulative results over the 6-month period for each business area.

We would now like to review Honda's business results for the second quarter by geographical segment.

In Japan, despite the rise in revenue related to volume and model mix, among other factors, an increase in SG&A expenses and other factors led to an operating profit of JPY 27.4 billion, a decrease by 20.2% compared to the same period a year earlier.

In North America, despite the effects of flooding in Mexico and other negative factors, the fact the legal settlement for a class action lawsuit was included in the results for the same period a year ago and other factors led to the operating profit of JPY 53.4 billion, an increase by JPY 54.1 billion compared to the same period last year.

For Europe, despite effects of cost reduction initiatives and other factors, the negative effects of ForEx fluctuations, among other factors, resulted in an operating profit of JPY 0.2 billion, a decline by JPY 2.2 billion compared to the same period a year earlier.

In Asia, the positive effects of cost reduction initiatives, an increase in revenue associated with volume and model mix and other factors resulted in an operating profit of JPY 127.5 billion, a 15.7% increase compared to the same period last year.

In other regions, which include South America, the Middle East, Africa, Oceania and other areas, despite an increase in revenue related to volume and product mix, among other factors, the negative effects of ForEx fluctuations and other factors resulted in an operating profit of JPY 7.9 billion, a decrease by 33.4% compared to the same period a year ago.

Shown here are the cumulative business results for the 6-month period by geographical segment.

The share of profit of investments accounted for using the equity method came to JPY 63.9 billion for the quarter, a 22.3% decrease compared to the same period last year mainly due to the reversal of an impairment loss, which was recorded in the same period last year, among other factors.

Consolidated capital expenditures for the 6-month period amounted to JPY 176.5 billion, a decrease of JPY 27.7 billion compared to the same period a year ago.

We would now like to discuss Honda's consolidated results forecasts for fiscal year 2019.

Incorporating the most recent sales trends, combined total units for the Honda Group sales were unchanged compared to the outlook announced previously.

Projected unit sales are 20,850,000 units for Motorcycle business operations, 5,285,000 units for Automobile business operations and 6,345,000 units for Power Product business operations.

The consolidated unit sales forecast for each business segment is as shown here.

The consolidated full year earnings forecast, which we explained earlier, is as shown here.

The increase and decrease factors for this consolidated fiscal year forecast as compared to the results of the previous fiscal year are as follows: operating profit, minus JPY 43.5 billion; share of profit of investments accounted for using the equity method, minus JPY 32.6 billion; finance income and finance costs, minus JPY 28.7 billion.

Regarding actual business performance derived by rearranging the order of the increase and decrease factors that impacted operating profit, if the real-term currency effects and temporary influences due to fluctuations in material prices are excluded, a real-term increase of JPY 169.5 billion is projected.

Compared to our previous financial forecasts for the current fiscal year, after incorporating the increase in profit due to improvements in business characteristics and the positive effects of ForEx fluctuations, among other factors, an increase in operating profit by JPY 80 billion is expected.

Finally, our projected capital expenditures, depreciation and R&D expenditures for fiscal year 2019 are as shown here.

This concludes our financial results presentation.

Thank you very much for your continued interest in Honda's activities.